Carlsbad describes conservative change amid record revenues
CARLSBAD — Carlsbad City Council took the first step this week by approving its operating budget for the 2022-23 fiscal year.
Staff presented the draft operating budget at their May 24 meeting. Each department reduced its operating and maintenance budget by 2% (a savings of $1.5 million), while a total of 22 new full-time hires were tentatively approved.
The council will meet again on June 14 to adopt the budget, which also allows them to make changes. In addition, staff will present budgets for the capital improvement program and strategic digital investment program at the June 7 meeting, according to City Manager Scott Chadwick.
The operating budget totals $342.2 million with revenues of $339.8 million, while general fund revenues are projected at $198.8 million and expenditures are estimated at $198.3 million. The operating budget is almost the same as last year, according to staff.
The council also voted to approve the continuation of the police department’s GUIDE program to counsel at-risk youth, which costs $130,000. With this addition, the city expects a total surplus of $200,000.
Chadwick said the city’s general fund reserve account is expected to reach $116 million, an increase of 41% since 2019-20. However, Chadwick, along with Deputy City Manager Laura Rocha and Chief Financial Officer Zach Korach said the city still projects a funding shortfall by the 2025-26 fiscal year where expenses exceed revenues.
“The annual budget is the most important policy document,” Chadwick said. “It shows our city council and the community where our funding comes from and exactly how it is used.”
Most of the new hires, meanwhile, consist of public safety personnel, with police, firefighters and lifeguards accounting for 17 of the new positions. Several of the new recruits are also temporary, as they have a lifespan of five years with certain services to help the city carry out various projects.
The city also estimates total revenue for fiscal year 2021-22 at $204.9 million, which Korach says is an “all-time high” and comparable to fiscal year 2019-20, before the pandemic, when the city was also on track for record revenues.
“A lot of this is related to an accelerated recovery due to pent-up demand,” Korach said. “These highs may not be sustainable in the near term.”
Korach said future surpluses are also expected to vary over the next four years, starting with estimated surpluses of $460,000 in fiscal year 2023-24, $3.5 million in fiscal year 2024-25, and $800. $000 for fiscal year 2025-26. The year after 2025-2026 is when the city expects “the lines to cross” with spending and revenue, unless the council chooses to add revenue streams.
However, Korach said the forecast did not include modeling of a recession, which economic experts are predicting due to record inflation, rising prices and supply chain issues. Korach noted that inflationary aspects, such as increases in utility costs, are applied to the upcoming budget.
“We applied conservative estimates,” Korach said of tax revenue sources. “Development is another big issue. Over the next five years, we do not expect development revenue to arrive at the same rate as over the past five years.
The council held a special meeting on April 20 to discuss those options, which included a sales tax increase, other tax increases and the legalization of cannabis, but declined to take action. However, city officials said the city could take other steps, such as banning annual service increases based on inflation and banning the rollover of unspent funds, to address these issues. expected deficits.
A majority of the board said they felt comfortable with the current state of the budget and forecast and that the plans in place allow staff to be flexible to make up any shortfalls.
But Mayor Matt Hall was less optimistic and recalled the challenges and similarities of the 2008 Great Recession.
“I would say we’re overly optimistic about our income and our expenses,” Hall said. “I couldn’t bear this. I’ve been there many times. It’s too optimistic for me. In 2007 and 2008, we pressed the pause button for three or four years. We managed to get out of it. »
Additionally, Councilor Peder Norby advocated for the city to allocate $3 million to revive the railroad trench project in the village. However, the council split 2-2 in the vote, with Councilor Keith Blackburn in second, so Norby’s motion died. Hall recused himself for conflict of interest.
Norby said the project will proceed because it is a priority for the federal government, the San Diego Association of Governments, railroads and others. However, a small contingent of residents are pushing back, citing the cost, which ranges between $400 million and $600 million, though the city is only expected to pay a fraction of the total.